Long Beach Shifts Into High Gear to Fill Vacant Offices
This city’s downtown office building boom shows no sign of abating even though new high-rises are expected to open without a full house.
“It’s been in first gear, now it’s going to shift into second. And we know there is a third, fourth and fifth,” said a bullish Paul W. Stern, a top executive with the Los Angeles development firm that presented its master plan last week for a $1-billion project on the site of the old Pike amusement park.
The city has a vacancy rate of about 15% in the 2.3 million square feet of office space currently available, most of which is situated downtown, according to the real estate firm of Grubb & Ellis Inc. The vacancy rate is slightly under the national rate of 17%.
The rate could soar at least temporarily when the 21-story Shoreline Square and the first 27-story tower of the World Trade Center open by the end of the year. Together, the two high-rises could add more than 900,000 square feet of new office space.
To cope with the vacancies, Long Beach must sell itself as never before, said Joseph Prevratil, executive director of the Port of Long Beach and president of the Long Beach Chamber of Commerce.
“For a short time, there is going to be an abundance of office space,” he said. “That is why everyone has to work together to promote Long Beach.”
Stanley Cohen, the Orange County developer of the gleaming pink-stoned Shoreline Square, acknowledges he is “a little disappointed” that prospective clients are not more aware of the advantages of relocating to downtown Long Beach. He declines to say how much of his building at Ocean and Long Beach boulevards is leased.
A survey conducted by the Charles Dunn Co. real estate firm last April showed that about half of the available space in the first World Trade Center tower is leased. A spokesman for the IDM Corp., developers of the center, could not be reached for comment.
In hunting for prospective tenants, real estate agents are trying to broaden the city’s appeal. They are reaching out to other cities, instead of trying to lure Long beach businesses from one building to another.
They are seeking businesses beyond the traditional base of maritime and port-related companies.
Long Beach is being marketed as a city with great ocean views, relatively clean air, a large available labor pool and lower rents for top-quality offices.
One of the most important factors, real estate agents say, is the city’s central location straddling the business centers of Los Angeles and Newport Beach-Costa Mesa. They hope to lure national firms by pointing out they could put a single office in Long Beach and be within half an hour’s drive of the two major business centers.
“More and more companies out of San Francisco and back East are hearing about Long Beach,” said Mark Hogan, a sales consultant for Coldwell Banker.
The sales representatives are having some success. Long Beach’s office space is being snapped up by tenants at a healthy rate that is on par with the rest of the state and better than the nation as a whole, said Dennis Macheski, the regional director of research for Grubb & Ellis in Irvine.
Bolstered by city government’s pro-growth attitude, more developments are in the planning stages. The high-rise Landmark Square project was recently brought before the Planning Commission. And then there is the mammoth Pike property project, the first phase of which could be started next summer.
Buildings to Be Close
The Pike property’s master plan was presented Wednesday to the city Redevelopment Agency board. It would include 3 million square feet of office, residential, retail and hotel space on the 13.8-acre site on Ocean Boulevard.
Although the 11 buildings would be densely packed, the project would create a haven for pedestrians, revive night life and give the city a new focus, according to developers.
Stern, executive vice president of the Ratkovich Co., co-developer of the Pike property, said an economic study last December showed that Long Beach is still searching for acceptance as a prestige office location.
“The key to this project’s success will depend largely on the market’s acceptance of IDM’s World Trade Center project and related establishment of downtown Long Beach as a Class A office location,” wrote Christopher B. Leinberger, managing partner of Robert Charles Lesser & Co. of Beverly Hills.
Stern said he disagrees with Leinberger’s conclusion that the World Trade Center will provide the acid test of success. He said the Pike project would have a broader appeal, particularly in its initial phase that includes moderately sized office buildings.
